reports
- Nauman Khan
Alhokair: Q3 FY 23 Result analysis – Weak results on one-off inventory...
Cenomi Retail reported a weaker than expected set of Q3 FY23 results. The company reported a net loss of SAR280mn in Q3 FY23 vs a net income of SAR16.0mn in Q3 FY22. Adjusting for the one-off inventory charges of SAR290mn, net profit stood at SAR10.2mn. This is significantly lower than the SNB Capital and consensus estimate of SAR23.7mn and SAR52.0mn, respectively. We believe the negative variance in earnings is mainly driven by 1) higher than expected net opex driven by increased depreciatio...
- Nauman Khan
Cenomi Retail to rationalize its brand portfolio
Cenomi Retail announced an overview of its transformation journey through a completion of a number of strategic transactions, which include 1) Rationalization of its brand portfolio, and 2) Increase its focus on Food & Beverage (F&B) business. The company plans to divest 26 non-strategic brands (c31% of its brand portfolio), with an uplift of profitability by cSAR25mn (or cSAR0.22/share). This represents c21% of the company’s 2023f profit. The company is also streamlining its F&B by offloadin...
- Nauman Khan
Alhokair: Q4 update – F&B and online sales to drive growth
We upgrade Al Hokair to Overweight from Neutral with a revised PT of SAR21.8. We expect the company’s topline and earnings to show strong growth in FY23 and beyond driven by 1) recovery in fashion retail sales post Covid-19, 2) increasing footprint in F&B and online sales and 3) return to net store expansion. We factor an average of 37 total net store additions per year, which we believe translates into higher sales. However, the prevailing higher inflationary environment is expected to put p...
- Nauman Khan
Alhokair: Strong results on higher revenue and lower opex
Alhokair reported strong set of Q1 FY23 results with net income increasing by 26.3% yoy to SAR57.7mn, vs a net loss of SAR44.6mn in Q4 FY22. This compares to the SNB Capital and consensus estimate of SAR50.2mn and SAR68.5mn, respectively. We believe the positive variance is mainly driven by higher than expected revenue, which stood at SAR1.71bn (+0.3% yoy, +23.0% qoq) vs our estimate of SAR1.50bn. Gross margins contracted by 325bps yoy to 16.3% vs our estimate of 18.0% due to increased sale o...
FAWAZ ABDULAZIZ ALHOKAIR with less fundamental stars is reduced to Neu...
FAWAZ ABDULAZIZ ALHOKAIR (SA), a company active in the Apparel Retailers industry, loses a star(s) at the fundamental level and sees its general evaluation downgraded. The independent financial analyst theScreener just removed a fundamental star(s) for a 2 over 4-star rating. As such, market behaviour remains unchanged and is evaluated as moderately risky. theScreener believes that the loss of a star(s) merits downgrade to the general evaluation of the title, which passes to Neutral. As of the a...
- Nauman Khan
Alhokair: FY22f, the year of recovery
We remain Neutral on Alhokair with a PT of SAR24.5. Alhokair profitability was significantly impacted in FY21f due to COVID-19 and inventory clean-up exercises. However, we expect a strong recovery in FY22f with a net income of SAR128mn. The growth in FY22f and beyond is expected to be driven by 1) ongoing operational overhaul, 2) increased footprint in the F&B segment and 3) higher investments in omni channels. The stock is trading at FY22f PE of 36.8x vs the global peer average of 32.6x. Th...
- Alaa Tolba
- Khaled Sadek
Long road to recovery; Maintain Neutral
Diversification efforts yet to be tested. Although the drop in Alhokair’s LFL sales in Saudi began to ease in 3QFY19 (c11% 9MFY19 vs. 14% in 1HFY19), the expansion in Saudi’s entertainment sector is hurting the apparel market. Shopping is no longer the sole entertainment source, as consumers are allocating a lower share to apparel spending (12% of total PoS in 2018 vs. 14% in 2016), forcing retailers to offer excessive discounts to spur demand. We expect the drop in Saudi revenue to sustain in F...
- Alaa Tolba
- Khaled Sadek
ALHOKAIR AB | New low for earnings in FY19, downgrade to N
Macro headwinds overshadow Alhokair’s efforts. Further improvement in earnings is hindered by Saudi’s dropping LFL (-14.1% y-o-y in 9MFY18), which we see as sustainable in FY19, as well as the higher Saudisation costs to comply with the MoL’s Jan-18 decree, enforcing full Saudisation in apparel stores as of Sep-18. We downgrade our rating to Neutral and cut our 12M TP by 30% to SAR32.0/share, assuming lower FY19-22: i) EBITDA margins by 2.7ppt, and ii) sales/sqm by 12%, to reflect a delay in rea...
- Mohammad Kamal
Arqaam Capital - Fawaz Alhokair Q1 18A prelim results
Domestic LFL sales decline y/y on weak overall consumer spending – Ramadan period sales fall short of expectations Rent and other cost savings support gross margins which expanded 60bps y/y Finance cost weigh down on EPS as adjusted net income decline 14% y/y. We tweak our FY 18/19e assumptions and update our WACC parameters. This produces a new TP of SAR 48 in line with CMP. Downgrade to Hold
- Alaa Tolba
Strategy to reap rewards; upgrade to Overweight
Positive growth outlook as Alhokair delivers. We upgrade our rating to Overweight from Neutral as Alhokair’s new strategy proved successful in 4QFY17 (Saudi gross margin +c10 ppt y-o-y to 26.7%). We believe the restructuring efforts, space and inventory optimisation plans should pay-off, improving margins and easing off the drop in store yields, despite Saudi’s spending pressures. We raise our TP by 30% to SAR45.5/share on 90 bps lower WACC and 12% higher FY18-22e EPS estimates on better margins...
- Ghada JENDOUBI
Dwindling profits
Alhokair recorded a 1.7% yoy decline in Q3 2016 consolidated revenues to SAR1.43bn vs. SAR1.455bn in the same quarter last year. The group posted a net profit amounting to SAR40.5m, down 55.6% compared to Q3 2015 (-31% on a qoq basis). The decrease in net income was mainly due to additional markdown during sales period (higher than expected discounts) in order to mitigate the impact of the decrease in demand as well as extra provisions and increasing new stores costs.
Ford Equity International Rating and Forecast Report
Ford Equity International Research Reports cover 60 countries with over 30,000 stocks traded on international exchanges. A proprietary quantitative system compares each company to its peers on proven measures of business value, growth characteristics, and investor behavior. Ford's three recommendation ratings buy, hold and sell, represent each stock’s return potential relative to its own country market.. The rating reports which are generated each week, include the fundamental details behind...
- Alaa Tolba
Weak margins a new norm; downgrade to Neutral
Cut target price by 26% on weak margin outlook. We downgrade our rating to Neutral on a 26%-lower target price of SAR43/share. After seeing the magnitude of discounts Alhokair endured in 4QFY16 in order to maintain an unchanged year-end inventory balance (DoH of 148), we believe achieving margin stability (as per guidance) will be a challenge, particularly given fiscal adjustments y-t-d and the likelihood of more to come. We reduce our FY17 EPS estimate by 35% as a result. Limited clarity on the...
- Mohamed Zein
Upgrading from UW to N on expected boost in local consumption
More social benefits. The Kingdom’s decision to disburse a one-time two-month bonus of SAR55bn to public sector employees in 2015 (vs. SAR42bn in 2011, which included an increase in minimum wage) implies additional take-home pay per employee of SAR47k, 3% over the increase realized in 2011, on our calculations. Back then, Alhokair’s Saudi stores’ sales per sqm increased by 16% annually over 2011-12 (also aided by the application of Nitaqat credits in the private sector). We expect a similar effe...
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